Wall Street closed out the market’s best week in eight months Friday with a broad slide as technology and health care stocks gave back some of their recent gains.
The pullback, which followed a sell-off in markets around the world, snapped a four-day winning streak for the major U.S. stock indexes. Even so, the benchmark S&P 500 notched its biggest weekly gain since June.
Stocks rallied strongly for most of the week, erasing all their earlier losses from worries about the severity of the economic fallout from a new virus from China that’s rapidly spreading. Stronger-than-expected reports on corporate profits and the U.S. economy helped assuage the fears, as did increasing hope that central banks and governments around the world can support markets with rate cuts and stimulus.
But with health experts still unsure about how far the virus will spread, how deadly it may be and how much damage it will ultimately cause the global economy, many investors opted to sell Friday to lock in some of their recent gains in case there are potential negative headlines about the outbreak over the weekend.
“The market is trying to digest all of this going into the weekend after a pretty volatile past couple of weeks,” said Ben Phillips, chief investment officer at Eventshares. “This is just a little profit-taking because there are still these risks out there and it's unclear if this coronavirus really does drive a broader global market slowdown.”
The S&P 500 fell 18.07 points, or 0.5%, to 3,327.71. That trims its gain for the week to 3.2%, which is still its best performance since June. The Dow Jones Industrial Average dropped 277.26 points, or 0.9%, to 29,102.51. The Nasdaq slid 51.64 points, or 0.5%, to 9,520.51.
Smaller company stocks bore the brunt of the selling. The Russell 2000 index lost 20.68 points, or 1.2%, to 1,656.78. Stocks markets in Europe and Asia also closed lower.
Uncertainty over the outbreak overshadowed the latest encouraging data point on the U.S. economy. A government report Friday showed that many more jobs were created in January than economists expected. Employers added 225,000 last month, comfortably above forecasts for 161,500 and December’s pace of 147,000.
Economic reports from outside the United States, meanwhile, were more discouraging and helped lead markets lower before trading opened in New York.
In a sign of the market's caution, Treasury yields fell as prices for ultra-safe U.S. government bonds rose. The yield on the 10-year Treasury dropped to 1.58% from 1.64% late Thursday.
The encouraging U.S. jobs report notwithstanding, the big wild card for the economy is how much damage the outbreak of a virus spreading from China will do.
The virus has infected more than 31,400 people around the world, and killed more than 630, nearly all of them in China. The director-general of the World Health Organization said Friday that a drop in the number of new virus cases for two days is “good news” but also cautioned against reading too much into that.
Chinese factories and offices are starting to reopen following an extended Lunar New Year holiday, but companies are forecasting big revenue declines due to the closure of stores, amusement parks, cinemas and other businesses.
Japan's Fast Retailing announced it has closed 350 stores, or about half of its 750 outlets in China to comply with quarantine regulations, while Toyota Motor said it was extending production stoppages at its China factories by an extra week, to Feb. 16. Nissan Motor said January sales of the company and its local partners fell nearly 12% in January from a year earlier due to the virus outbreak and the prolonged holidays.
Investors were encouraged earlier this week after China promised tax cuts and other help to businesses in a bid to offset the economic blow from the outbreak. Beijing also cut tariffs on $75 billion of U.S. imports as part of a “Phase 1” trade deal with Washington signed last month.
“They’ve pumped in $200 billion of liquidity in their markets and they’re doing lots of other things to goose their economy,” Phillips said. “You’re going to see some slower growth in China this year.”
Payment products company FleetCor Technologies led the tech sector slide Friday, dropping 6.7%. Abiomed was the biggest decliner in the health care sector, falling 4.6%.
Financial, industrial and material stocks also fell, outweighing slight gains by household goods makers and communication services and real estate companies.
Benchmark U.S. crude fell 63 cents to settle at $50.32 per barrel. It dropped below $50 earlier this week, after being above $60 toward the start of the year. Brent crude, the international standard, slid 46 cents to close at $54.47 per barrel.
The price of crude oil has swung violently in recent weeks with worries about the virus, and how much it will sap away demand for fuel because of drop-offs in tourism, travel and other economic activity.
The latest drop in oil prices weighed on energy stocks. Halliburton fell 2.1%.
Energy stocks in the S&P 500 are down 11.5% over the last month. Every other sector in the S&P 500 is up over the same time.
In other commodities trading, wholesale gasoline rose 2 cents to $1.52 per gallon. Heating oil declined 3 cents to $1.64 per gallon. Natural gas was unchanged at $1.86 per 1,000 cubic feet.
Gold rose $3.50 to $1,568.60 per ounce, silver fell 12 cents to $17.67 per ounce and copper fell 4 cents to $2.56 per pound.
The dollar fell to 109.74 Japanese yen from 109.97 yen on Thursday. The euro weakened to $1.0946 from $1.0997.
AP Business Writer Joe McDonald contributed.